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For the Love of Money

November 07, 2012

Money, money, money ... Must be funny ... In the rich man’s world Money, money, money ... Always sunny ... In the rich man’s world All the things I could do ... If I had a little money ... It’s a rich man’s world*

The No. 1 reason for divorce in America: money. The source of countless wars throughout history: money. What it takes to be president of the United States: money, and a lot of it — how about needing to raise $1 billion for a job that pays $400,000 a year, puts you in the world’s tiniest bubble, turns your hair gray (except for Ronald Reagan thanks to tubes of Grecian Formula). And half the world always disagrees with you — no matter what you do.

Money is like water. It is necessary, and in many parts of the world it is in short supply. It has a purpose, but it’s not durable. In excess, it’s overly visible and utterly destructive.

I recently asked a former Cabinet member, “What was the most surprising thing about Washington, D.C.?” He immediately said, “The singular goal of the people on the outside is to be back on the inside, and the only objective of the people on the inside is not to be back on the outside.” A sad commentary, but probably truer than we would like to believe. Power is all too often seated at the right hand of money.

But I have a different view: money can rent loyalty, but it can’t buy it. If money is the only thing keeping employees at your company, you’ll only keep them until someone else makes a higher offer.

And yet, many leaders hear “reward” and automatically jump to money. In fact, money is only the most expensive and least motivating currency circulating in the 21st century workplace. Even worse, typical money-based reward systems have been shown to produce a multitude of negative outcomes: poorer performance, diminished creativity and reduced interest in tasks that were once intrinsically interesting, to name just a few detailed in Dan Pink’s excellent “Drive,” a well-researched, forward-thinking examination of employee psychology. Pink shows that using rewards to motivate knowledge workers requires an approach far more subtle than “carrot and stick.”

One counterintuitive example: You might guess that the bigger the performance bonus, the greater the effect. Not so. In a study at CalTech, scientists found that above a certain size, the potential for a bonus negatively affected participants’ ability to succeed at a simple arcade game. The phenomenon seems to be explained by “loss aversion.” Humans fear the pain of losing more than they desire the pleasures of winning. The more reward on the line, the more the participants focused on losing — and lose they did.

Another study, at the London School of Economics, found that financial incentives undermine overall performance because they can “reduce intrinsic motivation and diminish ethical or other reasons for complying with workplace social norms such as fairness.”

In my sixth year as a CEO, I’m not naïve — how employees are paid certainly influences how they behave. But how much, and in what ways? Business management psychologist Frederick Herzberg first articulated the idea that “hygiene factors” — such as salary, security and status — were crucial for avoiding job dissatisfaction, but had little impact on job satisfaction. In other words, you want to pay employees enough so that money is their least concern at the workplace — but to motivate, reward and celebrate them, the buck (literally) stops elsewhere.

Once upon a time, a faraway kingdom was devastated by drought. The crops failed, and the ground hardened and cracked. And so the king ordered his staff to hire the best digging crew in all the land. The crew arrived with picks and shovels and began digging. Six feet, eight feet, ten feet — the workers kept digging. Finally, they put down their tools. All this digging was absurd! Besides, it was hot, and they had nothing to drink.

Enraged that the crew was refusing to dig, the king ordered them put in jail. His wisest adviser, however, asked to speak with the workers. “Come,” he said, and led the crew on a tour of the kingdom, past the fields that had turned to brown stubble, the children who sat listless in the dust, the cows that were chewing dry straw instead of green grass. “You’re not just digging,” the adviser said. “You’re bringing life back to this kingdom.”

Immediately, the workers rushed back to the task. They dug day and night until they struck water. When the king came to see the well, he asked the crew what had made such a difference in their work. “Once we understood why we were digging,” the workers said, “nothing could stop us until we had finished the job.”

The moral of the story: The “why” is more sustainable than the not-so-durable “how much.” The “why” aligns, unifies and elevates. At every level, team members see how their work affects the bigger picture. Purpose is that bigger picture. With purpose, individual members of the team come together, becoming a whole that is, indeed, greater than the sum of the parts. Purpose captures hearts and minds.

This issue of Briefings is about “Facing Now,” which means accurately viewing today, for that will be the starting point for tomorrow. What is today’s reality? CEOs are in a brutal fight for growth and relevance. Easy growth is over. In this decade, growth will be driven by innovators who are capable of crossing borders.

In this knowledge economy, employees need heightened self-awareness, learning agility and cultural dexterity. They must bring creative ideas and collaborative impulses into their work. This is not the assembly line, and the way employers motivate workers must change accordingly. So what are today’s workers after?

Look to maximize three things, according to Pink: • Autonomy — “the desire to direct our own lives” • Mastery — “the urge to make progress and get better at something that matters” • Purpose — “the yearning to do what we do in the service of something larger than ourselves.”

Compensation, while important, is secondary to the employees’ desire to be challenged, to contribute, to be recognized and to understand how their actions are helping the organization progress. People want to know that they belong, that they are an integral part of something that is bigger than themselves.

To autonomy, mastery and purpose, I’d add a related fourth. For a moment, set aside the footnoted, peer-reviewed studies and assume that only two motives matter: “for love or for money.” In this dichotomy, love wins every time.

You might think that bringing the idea of “love” into your management strategy won’t work unless you’re in the organic ice cream business, or something similarly soft and squishy. “I double dog dare you,” management expert Gary Hamel told BigThink.com, “go into your next company meeting and say, ‘What we really need in this organization is, we need more love.’ ”

The recoil from “love” in a workplace context is understandable — and yet the most potent rewards, the most meaningful celebrations, share this root characteristic. They make the employee feel loved. Love, here, is being part of a community that appreciates and celebrates each other deeply and personally, by a community that trusts each other to do the right thing, by a community that supports its members’ autonomy, mastery and purpose.

Leaders need followers, and emotion remains the most potent means to change minds, by gaining access through the heart and then following it with reason. Why should relationships in business differ from any others? When the leader communicates, “We couldn’t have done it without you,” what he is really saying to each contributor is, “You are loved.”

Letting employees know that you genuinely, personally appreciate them means going beyond whatever might be promised in their contract. Informal recognition should be constant and tailored to the employee and the situation at hand — a handwritten note, a simple “thank you.” Celebrate the incremental achievements as well as final results. Journeys, not destinations, are often what we remember most, the quality, depth and richness of experiences along the way.

As a leader, if you are looking for team members to believe in you, you may be disappointed. Rather, believe in your team members, and you will be amazed.